Kolkata: Median tariff revision on an all India basis was subdued at 3% and 1% for FY2018 and FY2019 and it is likely to remain at similar levels for FY2020, ratings firm ICRA has predicted.

In a report, ICRA said: “While power distribution has seen significant reduction in losses and debt following debt restructuring under Ujwal DISCOM Assurance Yojana (UDAY), tardiness in tariff filings and inadequate tariff revision proposals for FY2020 remain an area of concern. “

“Apart from delay in tariff filings and inadequate tariff proposals, the lack of progress in reducing distribution loss levels in line with the targets agreed under UDAY remains a concern area for the entire power sector,” Sabyasachi Majumdar, senior vice president & group head – corporate ratings, at ICRA.

This delay in filling of tariff petitions by DISCOMs is a deviation from terms of the UDAY, wherein they are required to file tariff petitions in a timely manner so that the state electricity regulatory commissions (SERCs) can issue tariffs orders by March end.

Moreover, tariff hikes proposed by DISCOMs and approved by regulators for the past two-three years have remained lower than what was agreed under UDAY, leading to persistent gap between average tariff and average cost of supply, although the gap has reduced in recent years.

Commenting on the impact of delay in tariff petition filings Majumdar said: “The median tariff hike for the DISCOMs at all India level has reduced from 8% for FY2015 to 4% for FY2016 and FY2017 and further to 3% and 1% for FY2018 and FY2019 respectively.

“We expect tariff hike to remain subdued for FY2020 as well, given the limited or no tariffs hikes proposed by most of the discoms in view of the upcoming Lok Sabha elections. This is likely to slow down the process of financial loss reduction which was initiated by UDAY.”

ICRA notes that state distribution utilities in 17 of the 29 states have filed tariff petitions for FY2020, reflecting a less-than-satisfactory progress. This is despite all utilities requiring to file tariff petitions for FY2020 by November 30, 2018 under tariff regulations so that tariff orders could be issued by end of March 2019.

In terms of proposals for tariff hikes, discoms at Jharkhand, Karnataka and Uttarakhand have proposed sizeable tariff revisions ranging between 13.7% - 22.5%, to meet the entire gap arising from true-up of previous years and the projected revenue requirement for FY2020.

However, discoms in several key states like Andhra Pradesh, Assam, Bihar, Haryana, and Punjab have not proposed any tariff hike or proposed limited tariff hikes, despite having significant revenue gap projected in the tariff petition for FY2020.

Along with increase in the cost of power procurement, the revenue gap in these states can be attributed to unrecovered revenue gap from previous years. This gap in some states can be attributed to inadequate implementation of fuel and power purchase cost adjustment framework, which would have enabled timely pass-through of variations in power purchase cost to the consumers.

Tariff orders for FY2020 have been issued by regulators in six states so far. However, the actual tariff hike approved remained lower than the hike petitioned by discoms in Assam, Bihar, Jharkhand and Uttarakhand.

In fact, the power regulator in Assam has projected a surplus revenue for FY2020, given that approved power purchase rate and other expenses were lower than proposed by the discom.

This surplus has been passed on to the consumers. Similarly, the regulator in Chhattisgarh has reduced tariffs considering revenue surplus estimated for FY2020. The regulator in Bihar did not approve any tariff revision, while in Jharkhand and Uttarakhand, the regulators have allowed a lower tariff revision of 11.0% and 2.8% respectively against 22.5% and 13.7% requested by the utilities.

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